US drillers have taken a record number of oil rigs out of service during the past six weeks, underlining OPEC's market strategy
US drillers have taken a record number of oil rigs out of service during the past six weeks, underlining OPEC's market strategy. The oil rig count has fallen by 209 since December 5, which is the steepest six-week decline since Baker Hughes (BHI) began tracking the data in July 1987. The count was down 55 this past week alone to 1,366. Horizontal rigs used in US shale formations that account for virtually all of the nation's oil production growth fell by 48, the biggest ever single-week drop. Without high oil prices, shale oil is in many instances uneconomic - effectively, it's high prices that have made shale oil viable. The danger has always been that that if production surges (as it's done over recent years due to the plethora of US drill-rig owners cashing in on the fraccing boom), the resulting production glut would drive down prices and render many shale producers uneconomic.
Gavin has been a senior resources analyst following the mining and energy sectors for the past 25 years, working with Intersuisse and Fat Prophets. He is also the Executive Director, Mining & Metals with Independent Investment Research (IIR).